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Lending—Going Strong—Don't Forget the Details
Friday, July 15, 2016 6:40 AM

Steve Gibbs, CUCE, BSACS, AVP Shared Compliance, Credit Union Resources

According to the National Credit Union Administration, credit union lending has increased more than 10 percent in the first quarter of 2016. This is great news since income from lending is one of the chief elements of our financial foundation. It’s also a time to remember to keep our houses in order by maintaining a solid compliance program with regard to lending-related services. Compliance and lending professionals should consider focusing on:

  • Loan Policy Review. Changes to the military lending rules are just one reason we need to constantly review and revise loan policies. If mortgage services are offered, CFPB changes should be checked to make sure the credit union is abiding by the latest TRID changes. Additionally, these policies should be a work in progress. Loan officers should be adjusting and changing criteria to remain competitive with the market.
  • Appraisal Policy Review. Policies and procedures should be subject to review. Proper attention to appraisals provides appropriate valuation of credit union assets. Failure to follow guidelines can result in questionable coverage of loans and potential losses.
  • Collections and Related Policy Review. Of primary concern here is the potential for legal risk if policies aren’t kept current. Collections are always a significant target for litigation. Examiners are looking at effective collections strategies to mitigate losses and lower delinquency rates.
  • Fair Lending Risk Assessments. Fair Lending exams are becoming more commonplace with regulatory agencies, particularly the CFPB and NCUA. Examiners expect that credit unions have performed internal Fair Lending risk assessments or have had an independent party do so. These assessments can reveal many potential problems, including the perception of disparate or unfair treatment of individuals or groups, procedural inequities, and possible issues in dealing with lending service vendors. Other areas should include:
    • Loan products
    • Markets
    • Decision centers
    • Time frames
    • Prohibited basis and control groups
  • Lending Compliance Assessment. Sometimes it pays to take a step back and look at the big picture of program and processes. This involves a combination of staff, strategies, policies, procedures, and products.
  • Marketing/Advertising Policy/Practices Review. These review items include:
    • Messages in a newspaper, magazines, leaflets, promotional flyers, or catalogs
    • Announcements on radio, television, or public address systems
    • Online messages, such as email
    • Information on Internet sites, including the bank's own website
    • Direct mail literature
    • Printed material on any exterior or interior sign
    • Point-of-sale displays
    • Telephone solicitations, telephone voice response systems, and telephone hold messages
    • Letters sent to customers as part of an organized solicitation of business
    • Messages on account statements offering additional bank products or services
    • Messages on ATM screens promoting bank products or services

Areas to review include:

  • Fair Lending and Equal Housing Lender requirements
  • Regulation Z, Open and Closed-End
  • Office signage